WAYNE SWAN MP
MEMBER FOR LILLEY
CNBC ASIA SQUAWK BOX
FRIDAY, 2 MARCH 2018
SUBJECTS: Trump tariffs on steel and aluminium; US trade policy; global cooperation; G20
NANCY HUNGERFORD: Welcome back, let’s give you a look now at some of the damage here in the steel stocks in the region. All of this after President Trump announced that he will impose a 25 per cent tariff on steel imports and a 10 per cent tariff on aluminium ones as well. For more reaction, let’s bring in Wayne Swan who was former Treasurer and former Deputy PM of Australia. He is currently MP for Lilley, Queensland and he joins us from Sydney. And Matt Taylor also joins us this morning. First to you, sir, thank you for your time today. Let’s great straight to it: what is your reaction coming from the Trump administration on these tariffs?
WAYNE SWAN, MEMBER FOR LILLEY: Well I think it’s very unfortunate. There is optimism in the global economy, particularly in the Asia‑Pacific. There’s optimism in Europe. And there has been optimism even in the Unites States that we’re going to go through a stronger period of growth, the likes of which we haven’t seen since the Great Recession. And I think what this decision does is inject a huge dose of uncertainty into our economic discussion. And when you combine protectionism with the decision of the Trump administration to blow out its budget deficit through a huge unfunded corporate rate cut, I think what you’re seeing from the Trump Administration is that they’re playing with fire. The combination of both of those things combined could certainly affect sentiment and could lead to a dramatic increase in protectionism around the globe. And that’s not good for global growth.
HUNGERFORD: What does it mean for Australian businesses in particular?
SWAN: Well, that’s uncertain at this stage. It looks like Bluescope, our steel producer, will be affected. From what I can see, the countries that are most affected are Canada, the European Union, and a number of countries in Asia. So this is going to have a real ricochet effect around the region, I think, and round the world. Here, Bluescope has for years been battling international markets with a really good product, and to see one of our closest trading partners take this sort of action is not going to go down well in Australia.
SRI JEGARAJAH: Mr Swan, the US administration says that overcapacity of steel and aluminium is a threat to US national security, that’s one of the reasons why they’re considering imposing these tariffs. Is that legitimate?
SWAN: Well I don’t believe that it is. And if in fact they see China as a source of that, I mean China is not as affected by this measure as many other countries are. In fact, it’s their closest allies that are perhaps most affected by this decision. I mean Canada for example, and the European Union. It’s a very strange way of going about national security decision making.
JEGARAJAH: There is still some room to manoeuvre isn’t there? From what I understand, the Trump administration will approve these tariffs and make them material in about a week’s time. Do you think that there is scope for compromise for the US Administration to possibly reconsider what they are doing, given pressure and given the depth of feeling from trading partners like yourselves and elsewhere in the world?
SWAN: It’s very hard to see how they will walk back from this decision. I mean, there have been discussions with many countries over these questions for a long period of time. In fact, there’s a very senior Chinese representative in the United States at the moment, discussing the future of their trade relationship. It’s very hard to see how they will walk back from where they are now. This, as I said before, will result in much more uncertainty and suspicion and I hope it doesn’t result in a fully‑fledged trade war, but if it does that, then it’s going to have significant implications for the future of global growth. And it’s unfortunate given it’s taken us almost a decade to get back to what you’d call trend global growth from the Great Recession, to see these sorts of decisions happening now.
JEGARAJAH: So what would you characterise, then, as the diplomatic approach to all of this? Because clearly there is a problem in terms of global trade imbalances and it needs to be resolved. How do we resolve it without going down the route towards a trade war? How do we compromise? What would that look like Mr Swan?
SWAN: Well these are the sort of questions that should be successfully dealt with in the first instance through bodies like the G20. But as you would be aware, in recent years the G20 has not been as effective as it was at the height of the Great Recession. So I think we need to see a rejuvenation, if you like, of discussion at bodies like the G20, as well as international trade organisations so we can get this back on a pathway that leads to global growth for all of us. At the moment, if we have an outbreak of protectionism, that only ends one way – in a lot of pain and hurt and lower growth.
HUNGERFORD: And Mr Swan, when Sri talks about this issue, designating it a national security concern, do you worry that this is almost opening a Pandora’s Box and potentially rewriting the rules on trade, and potentially creating new barriers for any challenges to these tariffs?
SWAN: I think all of the above. We are in a different world now, and Mr Trump’s decision-making style is … unique, would be a kind way of describing it, but this is the situation we are in. So we need world leaders to get together, to come to the table, and have a decent discussion about this, and where we go from here. And as far as I can see, the body I see as most relevant in that context is the G20 – the G20 in terms of leaders, and the G20 in terms of Finance and Trade Ministers.
MATTHEW TAYLOR: What do you think it would mean for bilateral relationships between, for instance, Australia and the United States? Because we know that a huge delegation has just returned from Washington DC; it appeared to be a big love-in. We know at least for one that Bluescope Steel told us that they were of the understanding that the Turnbull Administration were making representations to the Trump Administration to try and get exemptions. Of course, we still need to see if those come to fruition, but if you just had a delegation in Washington, it all looks like the relationship is great and then this happens – what’s this going to do for bilateral ties?
SWAN: Well not a lot. I think it leaves Malcolm Turnbull and his discussions with the President high and dry. There is coverage in the United States today that there will not be any exemptions and if that’s the case, then Bluescope will be affected and Mr Turnbull will not have achieved anything in his trip when it comes to these issues.
TAYLOR: Ok. From where you sit, and of course given your experience as Treasurer of Australia, what should Australia be doing now in terms of growing the economy? Yeah, we’ve got some decent growth coming through but the attention is on corporate tax cuts to try and fuel growth that way. Should we be looking more to China, to India, rather than the United States and at what’s appearing to be an increasingly closed-off regime, if of course there aren’t any of these exemptions?
SWAN: Well Australia’s trade relationships are primarily in the region and our investment relationships are primarily with the United States and the West. So we live in both of those worlds. But Australia is deeply enmeshed with the Asia-Pacific and that’s where our future lies. But nevertheless, the US economy is still the largest economy and when it starts to behave in this fashion it sends a really bad message to others because bad behaviour begets more bad behaviour. And that’s a danger here. If this ricochets through with further decisions taken by other countries in retaliation, then we’ve got a real problem on our hands. So what should Australia do? Australia should be at the table, encouraging all of these participants to sit down and have a decent discussion about how these issues can be resolved so we do not get to the point of a trade war. And really, from my point of view, that’s really G20, that’s Prime Minister to Presidents. It’s a leadership issue. And we’re going to have to see some leadership from a body like the G20 if these matters are going to continue to play out the way they are.
TAYLOR: Ok we’re out of time, but Wayne Swan, appreciate your joining us as always. Thank you so much for chatting to us. Wayne Swan, Nancy, the former Deputy Prime Minister and Treasurer of Australia.
HUNGERFORD: Matt, thank you very much, and thanks to Mr Swan for joining us as well.
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